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Transcript of the question and answer session at the Ryde Business Forum, Ryde, Sydney.\n

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21 November 2003


Subjects: IR reform; FTA; PBS; MedicarePlus safety net; Superannuation; Wallabies



Prime Minister, how important is industrial relations reform and how is essential is it that is passes through the Senate?


Well industrial relations reform is one of the reasons why our economy is doing a lot better now, we are a more open economy, we have a lower level of unionisation in the private sector, we now have a union membership level of a little below 20 per cent in the private sector, there are a lot more enterprised based agreements. I find it very interesting that one of the apparent areas of conflict between the university sector and the Government in relation to education reform is the Government’s insistence that if you, as an academic employee want to have an individual workplace agreement you should have the right to have it. I would have thought that was a given in Australia in 2003 and the idea that there should be any serious debate about that, and there may be other reasons which are causing the difficulties, but I would have thought any serious debate on that is strange in 2003.

We could still go further, we could ultimately in one way or another get the recalcitrants in the Senate to agree to pass our unfair dismissal laws. I think you could drive unemployment in Australia down even further if we were able to get the unfair dismissal changes through the Senate. Independent assessments suggest that another 50 to 80,000 jobs would be created in small business if you could get rid of the current unfair dismissal laws which I know do intimidate a lot of small business operators.

So, there’s still a lot more to be done on that front but it think we have made a lot of progress. My real worry on industrial relations is that some of the state governments are now retreating because industrial relations in Australia has always been a shared responsibility between the Federal Government and the States and some states are beginning to reintroduce the rigidities

of the old awards system, Western Australia is a bad example of it, Victoria, New South Wales not quite so bad in some areas but still a worry, but that is a very big concern to me but federally I will continue, subject of course to the constraints that are imposed on us by the Senate.


One of the things that is very important to our members, not only in New South Wales but around Australia, is the difficulty that in retail small business having against the large power of big business. Would you be able to (inaudible) on the Government’s view for (inaudible) future?


Well I’m not surprised that Ron you should ask that question. This is one of the great sort of balancing acts that a free enterprise government faces. We want to see small entrepreneurs continue, we also want to have a trading and retailing regime that is good for the consumer. And I can perhaps best reply to you by saying that we won’t do anything, I certainly won’t do anything, which is going to tilt the current playing field unfairly against the small operators. Now I know there are some changes that many want, there’s a big debate going on about sections of the trade practices act and I’m not convinced that everything that is being put to us on behalf of small business is necessarily implemented going to produce a better climate.

There’s no way any government can guarantee that there won’t be some abuses of market power in a free enterprise economy, we can’t protect every small business, and I’d be misleading you if I pretended that would do otherwise. I understand how hard it is to run a service station, I understand how difficult it is to deal often with large oil companies, I’m aware of that, they’re often not the most benign people in the world with which to deal. On the other hand they live in a competitive environment like anybody else and we have to be realistic.

A free enterprise government which we try to be is always told that it should interfere as little as possible, unless the interference might be of advantage to a particular business or a business sector, in which event interference is welcome and invited. So we’ve got to try and strike that balance and I hope from the tenor of my remarks I’ve, as honestly as I can, conveyed to you a concern to preserve the small business sector that you represent without pretending that I can promise that all of your members are going to continue and recognising that we have to strike that balancing act between the two.


Peter Cranston from the Australian Self-Medication Industry. Mr Prime Minister, you mentioned the…




Yes. You mentioned the Free Trade Agreements that are being looked at at the moment, how vulnerable is Australia’s PBS system?



It’s not, the elements of the PBS system are not going to be traded away in those negotiations. I in fact with my discussion with President Bush when he was here a few weeks ago suggested to him that America should introduce something like the PBS system in his country, I don’t think it’s going to happen. But I think it would be very good for the consumers in the United States if it were to happen. The pharmaceutical benefits system is a very good one, and I know there are a few manufacturers in this room, perhaps representatives, who may not agree with that quite so enthusiastically as I do, and the Government is in the position of holding what when I was at school they used to call a monopsomy, in other words a buying monopoly, and we are in that position. But it does guarantee that the average citizen in this country has access at an affordable price to lifesaving drugs and that’s something that’s very important to Australia, and I want to make it very clear we are not going to trade that wonderful facility away in the Free Trade negotiations, we’re not. Now you can have debate about different things at the margin but we’re simply not going to trade that away and we’ve made that very clear to the Americans and in fairness to them they do understand that, there are obviously in the Free Trade discussions there’ll be some things that we will need to agree to that will be of advantage to the Americans in certain areas, that’s the nature of it, we can’t expect them to give us significant access to their agricultural market without them getting some things in return. But I certainly don’t believe that what we would agree to give in return will damage the economic interests of this country, I think some of the things they’re requesting, I think in the long term will be of advantage because they could result in further opening up of the Australian economy. But the PBS in its essential character is just not on the list and is not up for grabs or not up negotiation.


Mr Prime Minister, Marie (inaudible) from ScienceTech Australia. The Medicare reform package, it seems to be making very good progress in the Senate. The new Health Minister has negotiated very well. Can you just comment on the likelihood of the timeframe of the package and the situation between the Federal Government and the State Government with funding responsibilities and actual delivering of services and whether we can see some reform in the future so that the State Governments actually deliver what they should be delivering to the community.


Well on the question of the Medicare changes, I think they have been well received by the community, how they end up being received in the Senate I guess we’ll find out next week. There is only one item that’s to be voted on by the Senate, there’s only one thing that needs legislation and that is the proposal to introduce a new safety net and that safety net says that if you are a concession card holder and your expenses, your out of pocket expenses go over $500 in any year then you are reimbursed 80 per cent of the excess. If you are not a concession card holder but you are in receipt of family tax benefits, in other words if you’re a family man or woman and the combined out of pocket expenses of yourself and your husband or wife and children, combined together, go over $500 then you get that same facility and that if you’re the rest of the community, a person whose kids are grown up or is earning more than $80 - 90 - 100,000 a year, are the limits depending on the number of children where family tax benefits cut out, the threshold for that is $1,000 and then you get the 80 per cent reimbursement.


Now this is the first time since Medicare was introduced, and indeed the first time ever that this country has the prospect of a universal safety net. And what it does mean is that people will have peace of mind against the possibility that through no fault of their own they will hit a period in their life where they have a lot of unexpected expense either for themselves or their children or both which are going to cause them severe financial difficulty. Now we hope that the opposition parties in the Senate will support this measure. I find it very hard to believe how anybody could realistically vote against it unless their purpose is to make it difficult for our reforms to be implemented in the hope that that will make us more unpopular at the end of next year when the election is held and they might thereby gain a political advantage. But if that is their reasoning then they are seeking to gain a political advantage at the expense of the welfare of the families in particular of Australia.

So, I hope it will get passed Marie, I can’t tell until we actually get there next week, there have been some encouraging comments made by a number of people but until we actually get there and we see the whites of their eyes, so to speak, I don’t really know exactly what is going to happen.

You ask about the Commonwealth and the States interface. The problem with health, one of the problems with health is that there are some things that are the responsibility of the states, there are other things that are the responsibility of the Commonwealth. Public hospitals are totally run and operated by State Governments. Although the Federal Government contributes more money than the states do to the operation of State Government hospitals, we don’t have any say in their operation. And I would like a situation where there was more cooperation. We have in fact made some progress. We have in fact under the new Health Care Agreements made a bit of progress in the area of cooperation between the Commonwealth and the States, but I think there is probably room for a lot more. We have increased by 17 per cent in real terms, that’s over and above inflation, the promise we make to the states for the funding of their hospitals over the next five years, and I believe that the new MedicarePlus policy will provide a further underpinning of our responsibilities so far as health is concerned.


Mr Prime Minister, Lyn (inaudible), Chartered Accountants and Financial Planners from Eastwood. I have an interest in superannuation, which is a highly complex area to work in because of all the many changes with dates attached to them. I’d like to know whether the Government plans an overview of the entire superannuation system. For instance, I see there is a number of inequities where one can now (inaudible) in one’s superannuation on divorce or on one’s ongoing employer contributions, but one can’t split with one’s spouse superannuation on accumulated balances. There are anomalies where employees’ contributions or employers’ support contributions can be claimed as tax deductions 100 per cent, but self-employed people have a scaled down deductibility for their contributions. There are anomalies where people who have access to highly expensive advice can use their superannuation for estate planning purposes, to shift their balances to other parties without endangering their reasonable benefits limit, where the normal people don’t have access to this information. I’d just like to know whether the Government plans a total overview of the superannuation.



I can assure you that it’s one of those areas of policy that is, as it were, under continuous review. I’m a little wary of the idea of having a sort of total Royal Commission type, once and for all, grand slam review because it would take years, given the contrary views that so many people hold on it. Whenever you contemplate significant change to superannuation, there will always be some… that’s very big change, there will always be potential winners and also potential losers, unless of course the view is taken that you can find unlimited amounts of additional revenue from some other source in order to effect the changes. We went to the last election with some relatively modest but important proposals in relation to co-contributions for low-income earners in relation to splitting spouse entitlements, and also in relation to a progressive reduction in the not very popular superannuation surcharge. Now, we finally after a lot of backing and filling, we finally secured the support of the Senate to get, in an amended form, some of those measures through.

And I think what I can assure you of is this - that we don’t regard the current system as in any way perfect. It clearly isn’t, and it has been the subject of a lot of changes - some of which have been good, some of which have been not so good. What I think you will know from your own experience is that one of the really big changes occurred in the late 80s when the revenue draw through purposes, the taxation… the fundamental taxation arrangements were changed. It was explained at the time by the then Government as simply being a timing issue. But what of course it did was to very significantly alter the basis of the taxation and add a very, very significant… with a very significant revenue impact, the basis of the taxation of superannuation.

We want to keep superannuation attractive. We believe in the notion that people should be given incentives to provide for their own retirement, and we will take opportunities to further reform the system. I’m just hesitant about promising one all embracing, grand slam, Royal Commission type review. It would take a long time and it would operate as an excuse for nothing to be done while that inquiry is underway. Inevitably it would recommend some very major changes that would be the subject of enormous debate and contention in the community, but I’m not sure that at the end of the process you would necessarily end up with a better system because it is the case that unless you’ve got access to a lot of additional money - now some people might say, well you have, but there are a lot of claims on that additional money and it’s not quite as extensive as people think.

That $7.5 billion that seems to have deposited itself in people’s minds as being the surplus from last year’s budget - that $7.5 billion has already been spent. It has been used to repay Government debt. And it’s ended up in the hands of bondholders who lent the money to earlier Governments to finance their profligate deficits. And so we don’t have that $7.5 billion. It’s gone. Although every time I go around Australia, I keep running into people saying look, you’ve got $7.5 billion, can I possibly just have a couple of hundred thousand and you won’t notice it, they say.

But look, I think there is a lot of legitimate concern about the way the system operates and we haven’t put it in a too hard basket. We certainly haven’t. And as opportunities arise, we will endeavour to try and improve it.


I just might take this opportunity to ask the final question of the Prime Minister. You mentioned how you managed to tackle the runaway interest rate inflation, which is probably worse than facing up to a Joe Rokocoko. How do you plan on tackling someone like Jonny Wilkinson tomorrow night if you were the Australian coach?




I really do like the game very much, but one of the things I have taught myself as Prime Minister is when I get these wonderful opportunities to hold forth on tactics, not to pretend that I’m an expert. I saw the game last Saturday night, and it was the most… the first half was about the most exhilarating 40 minutes of rugby union that I have seen for years. I think if it’s dry and warm, it will be very good. That’s an entreaty to a power much greater than any I might have, to try and deliver the right conditions. And there was once… I once read a book called ‘God is an Englishman’. Well I don’t want him to be tomorrow night!


Maybe the Treasurer could find a little bit of that $7.5 billion just to put a roof over Stadium Australia for the night.